Gramado Company was created as a wholly owned subsidiary of Porto Alegre Corporation (a U.S.- based company) on January 1, Year 1. On that date, Porto Alegre invested $42,000 in Gramado's capital stock. Given the exchange rate on that date of $0.84 per cruzeiro, the initial investment of $42,000 was converted into 50,000 cruzeiros (Cz). Gramado's cruzeiro-denominated opening Balance Sheet are as follows: Balance Sheet as of January 1, 2021 Cz Cash 50,000 Plant and equipment 300,000 Total 350,000 Long-term debt 300,000 Capital stocks 50,000 Total 350,000 Income Statement for the Year Ended December 31, 2021 Cz Sales 540,000 Cost of goods sold (310,000) Gross profit 230,000 Operating expenses (108,000) Income before tax 122,000 (40,000) Income taxes Net income 82,000 During 2021, dividends in the amount of Cz20,000 were paid to the parent on December 1. Inventory was acquired evenly throughout the year with ending inventory acquired on December 1, 2021. Statement of Retained Earnings for the Year Ended December 31, 2021 z Retained earnings, 1/1/2021 Net income 82,000 Dividends (20,000) Retained earnings, 31/12/2021 62,000 2:22 s! 4G Description Balance Sheet as at December 31, 2021 Cz Cash 50,000 Receivables 100,000 Inventory 32,000 Plant and equipment (net) 230,000 Total assets 412,000 Long-term debt 300,000 50,000 62,000 Common stock Retained earnings, 12/31/2021 Total liabilities and stockholders' equity 412,000 The cruzeiro is the primary currency that Gramado uses in its day-to-day operations. The cruzeiro has steadily fallen in value against the dollar since Porto Alegre made the investment in Gramado on January 1, 2021. Relevant U.S. dollar ($) exchange rates for the cruzeiro for 2021 are as follows: $ 0.80 Average for 2020 January 1, 2021 0.84 Average for 2021 0.72 December 1, 2021 0.71 December 31 2072T 1.70 2:22 s! 4G Description The cruzeiro is the primary currency that Gramado uses in its day-to-day operations. The cruzeiro has steadily fallen in value against the dollar since Porto Alegre made the investment in Gramado on January 1, 2021. Relevant U.S. dollar ($) exchange rates for the cruzeiro for 2021 are as follows: Average for 2020 $ 0.80 January 1, 2021 0.84 Average for 2021 0.72 December 1, 2021 0.71 December 31, 2021 0.70 REQUIRED: a) Translate Gramado Company's 2021 financial statements into U.S. dollars. b) Compute the translation adjustment by considering the impact of exchange rate changes on subsidiary's net income